Opinion
C.A. No.H-01-1639 consolidated with H-01-2428 and H-01-2486 (Admiralty)
June 24, 2003
MEMORANDUM AND ORDER
I. INTRODUCTION
This case is a consolidation of several admiralty claims arising out of shipped famine relief cargoes from the United States to various ports abroad. The United States of America ("plaintiff) brings this action under the Carriage of Goods by Sea Act ("COGSA"), 46 U.S.C. § 1301-1315 for loss and/or damage to "Food for Peace" cargoes shipped abroad by carriers Ocean Bulk Ships, Inc., and Transbulk Carriers, Inc., in personam, and M/V OVERSEAS MARILYN, her engines, tackle, gear, etc. in rem ("defendants").
Before the Court are the plaintiffs requests for damages in the amount of $50,587.13 plus prejudgment interest at the rate described at 31 U.S.C. § 3717(a) and costs of court, according to 28 U.S.C. § 1920. The Court has reviewed the papers on file and concludes that the plaintiffs request for damages, prejudgment interest, and costs of court should be GRANTED.
II. FACTUAL HISTORY CONTENTION OF PARTIES
The Agency for International Development ("AID") oversees many programs involved in shipping and distributing food-aid abroad to starving underprivileged countries. These programs, known as private voluntary organizations ("PVOs"), are primarily used as diplomatic considerations to avoid embarrassing the national governments in which the donees reside. The Commodity Credit Corporation ("CCC"), an agency of the United States Department of Agriculture, purchases food from vendors in mid-western states, and provides freight and other transportation charges to the point of destination. The food is shipped to a port of departure in the United States where it is loaded onto a vessel. Title to the food is then transferred from the CCC to the PVO and a bill of lading is issued. The bill of lading details the type, amount, and value of the food being loaded onto the vessel. At this point, the PVO oversees the shipment of the foodstuffs to the intended donee overseas. Once the shipment reaches its destination, it is inspected by independent surveyors who document any cargo damage and/or loss. Generally, the PVO will immediately assign its rights to any claims for cargo loss and/or damage to the CCC due mainly to the fact that the PVO lacks the administrative power to efficiently enforce any claims.
Between September 1995 and May 1998, the CCC and PVOs shipped a number of foodstuffs via the defendants' vessel to famine-stricken countries abroad. Clean "on board bills of lading were issued for each shipment of cargo. The defendants' agents listed the "free alongside ship" or "f.a.s." value and freight charges of each cargo on the bills of lading they issued. Nevertheless, upon arrival, many of the cargoes were shorthanded, damaged, partly spilled from their packaging, and/or unfit for human consumption. Thereafter, the PVOs, except Norwegian People's Aid, assigned their interest in the cargo loss and/or damage claims to CCC for enforcement.
The PVOs in this case are Catholic Relief Services; Norwegian People's Aid; Care, Inc.; Prisma, Inc./Asociacion Beneficia Prisma (Peru); Food for the Hungry, Inc.; Fundacion Contra El Hambre (Bolivia); Caritas Boliviana (Bolivia); Project Concern International; and Adventist Development Relief Agency International.
"Free alongside ship" or f.a.s. values "include all costs of transportation and delivery of goods to the dock." 22C.F.R. § 211.2(k)
Freight charges are the amount paid to transport the cargo from the US port to the famine-stricken country.
The dispute in this case concerns shipments of cargo that were short or damaged. Based on the weight difference between the bills of lading and the independent surveyor reports, the plaintiff seeks monetary damages in the amount of $50,587.13, prejudgment interest, and court costs. The defendants do not dispute the independent surveyors' calculation as to the cargo losses and/or damages quantity. Rather, they dispute the monetary value of these cargo losses and/or damages.
A. The Plaintiffs Contentions
The plaintiff presents three main arguments. First, the plaintiff asserts that this situation is one where the market value is indeterminable, thus calling for a different method of valuation. Minerals U.S. Inc. v. M/V MOSLA VINA, 46 F.3d 501, 502 (5th Cir.) (quoting Illinois Central Railroad v. Crail, 281 U.S. 57 (1930)). Because there is no commercial market for these donated cargoes in the famine-stricken countries, the plaintiff asserts that damages should be calculated from the purchase price stateside. According to the plaintiff, this method of calculating damages is derived from the CCC's regulations and has been recognized by the Fifth Circuit. 22 C.F.R. § 211.9(c)(2)(ii)(B); United States v. Ocean Bulk Ships, Inc., 248 F.3d 331, 343 (5th Cir. 2001); United States v. Texas American Shipping, Corp., 2002 A.M.C. 1940, 1941 (S.D. Tex. 2002).
Specifically, the quantities lost and/or damaged are multiplied by the "unit landed value" of each cargo, calculated by adding the prepaid freight charges to the overall price of the cargo, then dividing by the quantity of the cargo.
Second, the plaintiff contends that its assignments provides standing to sue for all claims because there is a monetary value to the lost and/or damaged commodities. The fact these commodities cannot be sold or that these commodities are humanitarian in nature is not determinative of the damages estimate. Ocean Bulk Ships, 248 F.3d at 343; Texas American Shipping, 2002 A.M.C. at 1942.
Last, the plaintiff seeks the award of prejudgment interest and costs of court because the defendants refused to pay the damages when billed by CCC through its administrative claims process, forcing CCC to incur court costs. Concerning prejudgment interest, the plaintiff argues, the law permits the award of prejudgment unless "peculiar circumstances" would make such an award inequitable. Ceja v. Mike Hooks, Inc., 690 F.2d 1191, 1196 (5th Cir. 1982); Noritake Co. v. M/V HELLENIC CHAMPION, 627 F.2d 724, 729 (5th. Cir. 1980). Therefore, prejudgment interest should be awarded.
B. The Defendants' Contentions
The defendants, in turn, raise three arguments against the plaintiffs claim for monetary damages. First, the defendants contend that monetary damages, if awarded, should be limited to a pro rata return of the freight paid. In support of this contention, the defendants assert that the market value rule governs the damage estimate. Under this rule, the goods have no market value because they were taken out of the stream of commerce. Once the goods became the property of "Food for Peace" efforts, their value became humanitarian in nature. Thus, at most, a pro rata return of freight charges should be awarded.
The market value rule calls for courts to consistently rely on commercial market values of the cargoes when assessing damages in the event of loss. See BP North American Petroleum v. SOLAR 5T, 250 F.3d 307, 312-313 (5th Cir. 2001) (applying the "market value rule") and Sanib v. United Fruit, 74 F. Supp. 64, 67-8 (S.D.N.Y. 1947) (applying the nearest market value method where there is no market at the port of discharge.)
Second, the defendants contend that the plaintiff cannot recover through assignments from the PVOs to the CCC because the PVOs suffered no financial losses. The defendants begin their argument by asserting that the assignments given to CCC must adhere to the rule that the assignee "stands in no better shoes than his assignor." Because there was no monetary exchange for the transfer of title to the cargoes to the PVOs and because the PVOs did not pay any ocean freight, surveyors' fees, or any other costs related to the cargoes, the PVOs suffered no financial loss and, therefore, cannot transfer a claim for loss to CCC.
Merchants Corp. v. 9655 Long Tons of Yellow Milo, 238 F. Supp. 572, 574 (S.D. TX 1965); See also Florida Bahamas Lines v. Steel Barge Star 8000, 433 F.2d 1243, 1252 (5th Cir. 1970) (finding that an assignee cannot assert any claim greater than the assignor); and United States v. Buford, 28 U.S. 12, 30, 3 Pet. 12, 7 L.Ed. 585 (1830) (stating that "the transfer of any claim to the United States cannot give to it any greater validity than it possessed in the hands of the assignor.")
Third, the defendants contend that the plaintiff is not entitled to monetary damages because ADD only contracted for the ocean transportation of one of the cargoes, the Norwegian People's Aid bill of lading No. 22. The bill of lading names the PVOs and other entities as the shippers and consignees of the various cargoes. The defendants argue that the plaintiff did not contract for the ocean transportation as required by 22 C.F.R. § 211.9(C)(2)(i), because neither the United States, AID, nor CCC's name is on the bills of lading. Thus, under a strict reading of the statute, the defendants contend that the plaintiff is only entitled to damages, if any, to the cargoes shipped under the Norwegian People's Aid — bill of lading No. 22.
The regulation states, in relevant part. "Whether or not title to commodities has transferred from CCC to the cooperating sponsor [PVO], if AID contracted for the ocean transportation, CCC shall have the right to initiate, prosecute, and retain the proceeds of all claims against ocean carriers for cargo loss and/or damage arising out of shipments of commodities transferred or delivered by CCC hereunder." [emphasis supplied].
III. ANALYSIS
The sole issue before the Court is the issue of damages. The controlling statutory language on the issue is 22 C.F.R. § 211.9(c)(2)(ii)(B), It states:
The value of commodities misused, lost or damaged shall be determined on the basis of the domestic market price at the time and place the misuse, loss or damage occurred, or, in case it is not feasible to obtain or determine such market price, the f.o.b. or f.a.s. commercial export price of the commodity at the time and place of export, plus ocean freight charges and other costs incurred by the U.S. Government in making delivery to the cooperating sponsor, [emphasis supplied].
Although the statutory language seems to prefer using market value to determine damages, it alternatively provides a second method for situations where the market value is indeterminable. Such is the case here. This view is supported by the fact that the f.a.s or f.o.b method is repeatedly used in case law involving "Food for Peace" shipments by PVOs. See Texas American Shipping, 2002 A.M.C. 94Q Ocean Bulk Ships, 248 F.3d 331; United States v. Central Gulf Lines, Inc., 914 F.2d 621 (5th Cir. 1992) and United States v. Central Gulf Lines, Inc., 141 F.2d 315 (5th Cir. 1984). Note that the court in Texas American Shipping explicitly denied a request that "Food for Peace" cargo damages be determined by a pro rata return of the ocean freight paid. See Texas American Shipping, 2002 A.M.C. at 1941 (also stating there is "no authority to support a finding of a pro rata return of freight charges).
The defendants' argument that goods of humanitarian nature have no value is also rejected by the court. The Fifth Circuit, addressing this issue, has held that a defendant cannot use [the government's] humanitarian orientation of its cargo to avoid damages that would otherwise be properly awarded. Central Gulf Lines, 747 F.2d at 320. Thus, Fifth Circuit precedent requires that the damages be determined via the f.a.s. method where the market price is indeterminable.
Here, we have the bill of lading as some evidence, and a bill of lading is an appropriate method for determining damages. Ocean Bulk Ships, 248 F.3d at 343 (holding that the calculation of damages based on the stated value of commodities in the bills of lading was consistent with the COGS A). The defendants do not dispute the accuracy of the bills of lading, therefore, damages may be determined via the f.a.s. method.
Alternatively, the defendants argue that the plaintiff cannot recover through an assignment from the PVOs because the PVOs did not suffer financial losses. This argument is explicitly refuted by the Texas American Shipping court, which concluded that the language of § 211.9(C)(2)(ii)(A) creates "the necessary inference . . . that entities such as [PVOs] are entitled to recover damages from ocean carriers for lost or damaged cargo received under the Food for Peace Program." Id. at 1942. Thus, "standing in the shoes of the assignee", the United States or CCC is entitled to pursue monetary claims for cargo loss and/or damage.
Lastly, the defendants argue with one limited exception (Norwegian People's Aid — bill of lading No. 22), that neither the United States, nor any of its agencies or instrumentalities, including the CCC and AID, contracted for the ocean transportation as required by § 211.9(C)(2)(i). This argument fails because the CCC, an agency of the United States, fully paid for the ocean transportation of all of the cargo shipments. As such, the United States is entitled to "initiate, prosecute, and retain the proceeds of all claims' involved. This conclusion is not altered by the fact that the Norwegian People's Aid failed to assign their claim interest to CCC. In Texas American Shipping, the Court stated, "the United States, irrespective of any assignments, is entitled to recover damages for the lost and damaged commodities because it arranged for their ocean transportation." Id. at 1942-43 (citing 22 C.F.R. § 21 L9(c)(2)(i)). Put simply, the plaintiff is entitled to recover damages in accordance with the bills of lading for all lost and/or damaged commodities because it fully funded and arranged their ocean transportation.
The plaintiff has also requested pre-judgment interest in accords with 31 U.S.C. § 3717(a) and costs of court in accords with 28 U.S.C. § 1920. Analysis must "start from the bedrock premise that an award for prejudgment interest in actions under the general maritime law is the rule rather than the exception; prejudgment interest must be awarded unless unusual circumstances make an award inequitable." Ryan Walsh Stevedoring Co. v. James Marline Services, 792 F.2d 489, 492 (5th Cir. 1986). Thus, "discretion to deny prejudgment interest is created only where there are peculiar circumstances that would make it inequitable for the losing party to be forced to pay prejudgment interest." Masters v. Transworld Drilling Co., 688 F.2d 1013, 1014 (5th Cir. 1982).
In the case at bar, the defendants have not raised any peculiar circumstances that would create an inequity were prejudgment interest and costs to be awarded. Therefore, the plaintiffs request for prejudgment interest and costs should be granted.
It is so ORDERED.